What I do want to encourage as a Fox Lake bankruptcy lawyer is that debtors should think twice about signing a reaffirmation agreement on vehicles. Debtors should take a look at the market value of the vehicle and they should take a look at the amount that they owe on the vehicle. If there is a huge disparity in market value versus amount owed, in other words, if they owe a lot more than what the vehicle is worth, if they are upside down so to speak on the vehicle, then this is an opportunity for a debtor to surrender the vehicle and get out of the debt.
Most debtors are very tied to their vehicle and they don’t want to give up their vehicle. However, the decision to file bankruptcy is an economic and a financial decision with legal consequences. This is a great opportunity for a debtor to turn back a vehicle that is way upside down and get themselves into something else where they are on more of a level playing field.
There are countless numbers of finance companies and auto dealerships that are more than happy to sign up a post bankrupt individual for financing on a vehicle. In fact, before the bankruptcy case has even run to its conclusion, my clients will receive several solicitations from finance companies and auto dealers inviting them to come on in and look at a vehicle because they can do what’s called open bankruptcy filing or post-bankruptcy filing financing. In those situations, the debtor will get back into a car that is more affordable, a car that is not upside down in the interest rate and the monthly payment can be manageable for the debtor. There’s nothing worse than seeing someone who has just gotten out of debt signed a reaffirmation agreement for a high auto payment where they are going to be struggling going forward. Many times I have to do a second bankruptcy for someone who has gotten back into trouble with auto financing and sometimes, it’s on a debt that they reaffirmed on where we have to convert them or re-file a bankruptcy Chapter 13 just to reorganize the debt on the vehicle.
It sure helps if the reaffirmed debt amount per month is low. If the payment is too high, the debtor can be unable to pay on time throughout the duration of the loan. If this were to happen, the vehicle could be repossessed and sold at auction.